Pakistan’s equity market has recorded an increase of 13.5% or 5,569pts (USD based return of 12.9%) since the last MSCI semi annual review back in Nov’20.

At present, Pakistan has a weight of 0.021% in MSCI EM. Within the MSCI Pak index, MCB is the largest constituent (42.8%) followed by HBL (31.3%) and OGDC (25.9%).

Feb’21 Quarterly Review

As per MSCI Global Index Methodology Dec’20, the criteria for Emerging Markets includes full market capitalization at USD 1,830mn while free float market capitalization of USD 915mn along with ATVR of 15% is required.

Assuming cut-off date of Jan 29, 2021 for the quarterly review, only OGDC fulfills the total market capitalization criteria, while HBL and MCB are short by USD 527mn and USD 404mn, respectively. Whereas on the basis of free float market cap, none of the constituents meet the required criteria of USD 766mn.

However, given applicability of buffer rule (2/3 of benchmark criteria), all three stocks remain eligible on total market capitalization. Moreover, for free float market cap, OGDC and MCB appear eligible while HBL remains short by USD 89mn.

After applying buffer rule along with index continuity rule, we expect no additions and deletions of Pakistani stocks from the MSCI Main Index.

Moreover, TRG is expected to be included in MSCI small cap index in the upcoming review.

Full report here: